EEM Breakdown

Following the breakdown in trade talks between the US and China over the weekend, a significant breakdown of another kind is taking shape in one of the charts I follow. EEM is the Blackrock iShares Emerging Markets ETF that provides investors with exposure to the stock markets of Asia. China has a 33% allocation in the fund. The heavy selling that occurred yesterday has done significant damage to the chart. In 2018, EEM broke out above decade-long resistance in what was quite a bullish development for the region. However, the breakout was short-lived and EEM spent the rest of 2018 falling sharply. A second breakout attempt was made in early 2019 but this has also failed. The accelerating -10% decline over the last couple of trading days is concerning. A break below prior support at 37 would confirm the failed breakout and a more meaningful correction is underway. This chart confirms my view that continued caution is warranted at the current time.

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